Sri Lanka has embarked on a new journey towards sustainable development, thereby intending to pass on its benefits equally to every citizen in the country, said Finance Minister Ravi Karunanayake.
The minister pointed out that the population in the region is ageing faster than the growth of development therefore necessary infrastructure should be in place to meet the demand by ageing population in the future.
The Minister was delivering the keynote address at the 4th high level dialogue of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP) that inaugurated in Bangkok recently.
Representatives from economic and financial sectors of countries from Asia and the Pacific region participated in the conference. Minister Karunanayake was also inducted as the chairman of conference.
“Sri Lanka is going through a remarkable transition today powered by a well-crafted medium-term macroeconomic policy framework. Sri Lanka now has a peaceful environment to do business after ending three-decade long separatist movement. But as the new government took office in January 2015 we had to tackle an array of challenges from many fronts, “ the minister said.
“Our policy is focused towards developing the country containing broad policies of national importance that will assist the achievement of the far reaching reforms. For instance, my theme for the National Budget 2017 was ‘Accelerated growth with social inclusion’, which placed great emphasis on the alleviation of poverty in all manifestations beginning 2017.
“Social inclusion is a matter of prime concern and the participation of the entire population in the journey for development is a noble objective being ‘a society for all’. Such efforts will lay tremendous emphasis on social inclusion and sustainability in economic development, a commitment to achieve the United Nations proclaimed UN Sustainable Development Goals by 2030 ensuring shelter, safe drinking water and improved living standards for all.
“I wish to note that while the government is strongly committed to ensuring growth with social inclusion, the fiscal space remains constrained with historically low revenues of around 10-12 percent of GDP. Thus in the last two years in particular, significant emphasis has been placed on increasing revenue to augment the revenue to GDP ratio to at least 15-17 percent in the medium term. As such, measures have been taken to broaden the tax base through elimination of exemptions. We will also be introducing a new Inland Revenue Act, which has a simplified tax code and it is expected to facilitate better administration and compliance. At the same time, the introduction of Revenue Administration Management Information System (RAMIS) which connects the three revenue institutions with 27 other entities is also expected to generate better efficiencies in revenue collection. The Department of Customs and Excise also has seen structural improvements been introduced.
“Our government is working towards encouraging more private sector participation in the equity markets through major reforms which are centered on the introduction of a new Securities and Exchange Act and the Demutualization of the Colombo Stock Exchange (CSE) which is still a member-owned entity. This is expected to create better accountability and confidence amongst the investor community.
“It is now abundantly clear that options for financing infrastructure may greatly depend on the medium-term economic outlook and potential ‘headwinds’ that we may encounter in the global economic environment. In this backdrop, debt-fueled infrastructure development and economic growth may not be a viable option. Hence, the question we all would have to engage in is how governments could unlock any fiscal space for infrastructure spending and other funding requirement for development.
I believe that one of the fundamental challenges for the Asia-Pacific economies, in the medium-term, will be to increase revenue generation. Advanced economies in particular have a long history of using taxes and government spending to smoothen business cycles. If not properly designed and implemented, taxes can harm growth because they distort economic incentives and behavior.
It is noteworthy to consider that the Asia-Pacific region accounts for nearly 40 percent of global illicit financial outflows including tax evasion which was the largest share on a regional basis. The efforts have been initiated since 1970 to implement regional cooperative frameworks for tax administration in Asia Pacific with the establishment of the Study Group on Asian Tax Administration and Research (SGATAR).
“We are seeing an increase in the private participation in infrastructure development, attracted by rising demand for quality infrastructure and expectations of high returns. This has been made possible through different variations of public-private partnerships (PPPs) in the region. So, PPPs have emerged as a viable procurement method for infrastructure development in the region. We ought to implement PPP related reforms such as enacting PPP laws, streamlining PPP procurement and bidding processes, introducing dispute resolution mechanisms, and establishing independent PPP government units,” the minister added.